Download Presentation

Capital and Revenue Expenditure

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

Think it over

A builder was engaged to perform some work on your premises, the total bill being $4,500. If one-third of this was for repair work and two-thirds for improvements, what will be the correct accounting treatment?

Think it over

On 1 January 2009, DEP Tour Operator Limited purchased four second-hand tour buses. The list price of the buses was $500,000 each and the supplier gave a $200,000 trade discount because of the bulk purchase. The payment was to be made through four half-yearly equal instalments of $530,000 each. The company spent a further $1,200,000 on each bus for renovations. The freight charges for the delivery of the buses amounted to $108,000. During installation, an accident happened and the company paid a repair cost of $20,000. In order to legalise the use of the buses as tour buses, an inspection fee of $90,000 was paid. An annual licence fee of $80,000 was also paid. You are required to prepare a statement to calculate the cost of the buses. (HKAL 2001)

Incorrect treatment of expenditure

Capital expenditure is incorrectly treated as revenue expenditure

Revenue expenditure is incorrectly treated as capital expenditure

Capital expenditure is treated as revenue expenditure

Value of fixed asset is understated

Net profit is understated

Revenue expenditure is treated as capital expenditure

Revenue expenditure is treated as capital expenditureValue of fixed asset is overstatedNet profit is overstated